As per the commonwealth’s most recent fiscal plan, Puerto Rico is predicted to generate a total budget surplus of $15.2 billion through 2035, as $123.5 billion in federal catastrophe funding and coronavirus recovery money assist revive the local economy.
That excess is critical because the island’s fiscal oversight body intends to utilize it to offset loan repayments. If the Commonwealth is able to restructure its debt this year as part of its bankruptcy, it might resume repaying principal and interest on its bonds as January 2022.
The amended budgetary plan was posted on the board’s website late Thursday. While it pushes out expected shortfalls by 4 years to financial 2036, Puerto Rico Governor Pedro Pierluisi and the island’s legislative branch will need to enforce structural changes to maintain growth in the economy after federal funds run out, the board’s executive director, Natalie Jaresko, told reporters Thursday.
“The influx of federal reconstruction funding provides Puerto Rico with substantial energy to assist its economic rebound, but it also gives a chance to couple this federal investment with the changes needed to transform the rebound into long-term economic growth,” Jaresko said.
The multi-year plan serves as the foundation for Puerto Rico’s annual operational budgets. The board will vote on the budgetary plan on Friday.
The announcement comes as the committee has achieved initial agreements with bond insurers and opposing bondholder organizations that would reduce $18.8 billion in central government debt by 61 percent to $7.4 billion. These deals These deals may help the state to emerge from bankruptcy this year.
The predicted $15.2 billion advantage is for fiscal years 2022 to 2035, the final year when deficits are due to recover. This is an increase from May 2020, when the council adopted a budgetary plan that included the pandemic’s economic damage and included a $5.8 billion excess from financial 2022 through financial year 2031, with deficits starting in fiscal 2032.
Nonetheless, the $15.2 billion buffer is less than the board’s pre-pandemic forecast of a $18.4 billion surplus from fiscal 2022 to fiscal 2037.
The GDP of the island is predicted to grow by 1% this year, up from 0.5 percent previously estimated. It is therefore expected to expand by 1.4 percent during the following four years, compared to a previous prediction of a 3 percent decrease during that time.
“Government stimulus, which has supplied most of this lift, is a vital component of any rebound from a severe recession, but it is not sufficient,” Jaresko added. “It does not take the place of a genuine economic growth strategy.”
The budget strategy involves labor and welfare changes to increase worker participation, enhancements to K-12 education, lowering barriers to establishing and maintaining a company, and making power more dependent and inexpensive on the island.
As per the proposal, if these adjustments are implemented, they may raise revenue by roughly $31 billion from fiscal 2022 until fiscal 2051.
